SB 937 (Fee Deferral and Entitlement Extension) – 6.25.2024 Senate Bill 937 – Fee Deferral and Entitlement Extension
SUMMARY
Senate Bill 937 seeks to minimize the impact of
market fluctuations and high interest rates on
housing production by delaying local
government development fees and providing
additional time after a project has been entitled
for specified projects.
BACKGROUND
Local gover nments may apply fees on
development projects if the revenue is utilized for
necessary services and improvements for their
growing population. These fees range
significantly between jurisdictions, with Los
Angeles reporting a multifamily development fee
of $12,000 per unit, while Fremont reports
$75,000 according to UC Berkeley’s Terner
Center For Housing Innovation (Terner Center).
Additionally, while the magnitude of
development fees varies nationwide, the six
jurisdictions with the highest recorded fees are all
in California, according to the Wall Street
Journal.
Although development fees have long been an
established feature of the construction industry,
they often make up a sizeable portion of a project
budget. According to the California Housing and
Community Development Department, when
compared to total project costs, these fees can
range from 10 to 15 percent.
Whether or not a development fee is required by
a local government, these jurisdictions are tasked
with reviewing proposals an d approving those
that are deemed compliant, providing them with
an entitlement. While timelines can change
depending on jurisdiction, entitlements are not a
permanent authority to develop the proposed
project. Rather, if delays occur prior to
construction, a project’s entitlement may expire.
PROBLEM
While development fees are an expected part of
construction, they are nonetheless a burden and
barrier to new development. While more
comprehensive reform has been shown to have
positive results, deferring fees strikes a balance
between the developer and local government,
providing flexibility for the project while
ensuring local services remain funded.
According to the Terner Center, the deferral of
fees can result in less reliance on pre-
development funding, which is often more
expensive or difficult to secure.
Entitlement extensions provide similar flexibility
to the developer with minimal impact to the local
government. While this tool has been used in
specific instances, such as during the peak of the
COVID-19 pandemic, it is clear that the
construction market is still in flux and projects
may be disrupted due to change s in financing.
This is especially true of high interest rates,
which, according to Freddie Mac , hit a two
decade high in 2023.
Allowing leeway, both through the deferral of
fees and through entitlement extensions,
provides a layer of security for desper ately
needed projects.
Senator Scott Wiener, 11th Senate District
SB 937 (Fee Deferral and Entitlement Extension) – 6.25.2024
SOLUTION
Senate Bill 937 seeks to aid the production of
new homes by doing the following:
- Delay the payment of development fees
imposed by a local government until the
certificate of occupancy is issued.
Additionally, local governments may not
charge interest rates on any deferred fees.
- Extend housing entitlements issued prior
to Jan. 1, 2024 and set to expire on or
before Dec. 31, 2025 by 24 months.
Both of the above provisions apply to
projects that meet any of the following:
- 100% affordable housing projects
- SB 423 (Wiener, 2023)
- AB 2011 (Wicks, 2022)
- Density Bonus Law
- SB 4 (Wiener, 2023)
- SB 2 (Atkins, 2017)
- Projects 10 units or less
SUPPORT
- California Housing Consortium
(Sponsor)
- Housing Action Coalition (Sponsor)
- CA YIMBY (Sponsor)
- Apartment Association of Greater Los
Angeles
- Bakersfield City Councilmember Andrae
Gonzales
- Bay Area Council
- Berkeley City Councilmember Rashi
Kesarwani
- California Chamber of Commerce
- California Apartment Association
- California Building Industry Association
- California Community Builders
- California Hispanic Chambers of
Commerce
- California Rental Housing Association
- Capitola City Councilmember Alexander
Pedersen
- Central City Association
- Claremont City Councilmember Jed
Leano
- East Bay YIMBY
- El Cerrito City Councilmember Gabe
Quinto
- Fremont for Everyone
- Gilroy City Councilmember Zach Hilton
- Grow the Richmond
- House Sacramento
- Housing Trust Silicon Valley
- How to ADU
- LeadingAge California
- Livable Communities Initiative
- MidPen Housing
- Modesto City Councilmember Chris
Ricci
- Mountain View YIMBY
- Napa-Solano for Everyone
- Northern Neighbors
- Peninsula for Everyone
- People for Housing, Orange County
- Progress Noe Valley
- Rand Paster Nelson
- San Francisco YIMBY
- San Luis Obispo YIMBY
- San Mateo City Councilmember
Amourence Lee
- Santa Cruz YIMBY
- Santa Monica City Councilmember Jesse
Zwick
- Santa Rosa YIMBY
- South Bay YIMBY
- Southside Forward
- Streets for People
- Sunnyvale City Councilmember Alysa
Cisneros
- Tuolumne County Supervisor Jaron
Brandon
- Urban Environmentalists
- Ventura County YIMBY
FOR MORE INFORMATION
Stella Fontus, Legislative Aide
Email: [email protected]
Phone: (916) 651-4011